Tuesday, June 20, 2017

Quebec Can Be Successful After Independence

Over the years, many of my sovereigntist friends have asked my opinion on what a post-independent Quebec would need to do to become successful and mitigate the damage of losing so much federal financial assistance.
Let me play the Devil's Advocate and undertake an exercise that few if any sovereigntist leaders or economists would dare, that is examining what actions a government could and should undertake to assure the very best outcome.
Let's start by understanding that there are many, many loose dollars lying around and many economies to be made because quite frankly both Canada and Quebec are operated by big spenders who throw around money willy-nilly, without regard to value or necessity. Belt-tightening won't be the answer to Quebec's financial redemption after sovereignty, but with so much fat to cut, it certainly will help.
It was announced this week that Quebec is running a $4.5 billion surplus, a fantastic achievement by a federalist Quebec government determined to cut costs which paradoxically lends more credence to a viable independent Quebec.

That being said, there needs to be some considerable savings to make up the shortfall, when we consider the $15 billion that Ottawa contributes over and above what Quebec pays in federal taxes and levies, the number that seems to be bandied about by economists who presume to know.
Since Quebec is now running a $4.5 billion surplus, the shortfall becomes more manageable at $10 billion.
I write the following not as a dead accurate financial plan, but rather to expose ideas never discussed or proposed because quite frankly, sovereigntists have always been frightened to describe Quebec after independence.

Here are some thoughts which I hope readers will consider;

1. Negotiate down the portion of the national debt Quebec would inherit after independence.
In discussing the portion of federal debt that Quebec would accept, Jacques Parizeau, before the last referendum, opined that Quebec would accept up to 25% of the national debt.
That figure is nonsense, like asking a divorced couple to split up the debt evenly when, one of the couple is much poorer than the other. At any rate, Quebec would give up any claim to federal assets and be entitled to a set off in any debt assignment. Even if Canada saddles Quebec with just 15% of the national debt, both are getting a good deal, considering that Quebec is a drain on Canadian finances to the tune of $15 billion a year.
Today Quebec contributes about 18-20% of the federal budget (with a population of 23% of Canada) meaning that it pays about $5 billion of the $26 billion Ottawa spends on servicing the federal debt. Should Quebec be successful in accepting just 15% of the federal debt on separation, it would mean an annual saving of a little over $1 billion.

2.Create it's own currency
There's been a lot of discussion about keeping the Canadian dollar as legal tender in an independent Quebec, mostly to calm fears of the unknown, but the idea of having the Queen of Canada gracing the money in an independent Quebec is ludicrous. First of all, removing Canadian dollars from circulation would create a $10 billion one-time-windfall as new money printed is exchanged for Canadian dollars. Secondly, a floating Quebec dollar would reflect reality and should the currency exchange fall vis-a-vis the American and Canadian dollar, it would effectively devalue the cost of labour, something that could make Quebec more competitive, but citizens admittedly poorer. Remember those discussions of 'Dutch Disease,' and it's supposed impact on Canadian competitiveness?

3.Get rid of the armed forces
Part of reducing the Quebec portion of the federal debt is to relinquish Quebec's part of federal assets and nothing fits the bill better than the armed forces. Getting rid of the armed forces would save Quebec four to six billion dollars a year, putting a huge dent in the budgetary shortfall. Quebec could create a small coastal defence force consisting of small littoral patrol boats along with helicopters for search and rescue and coastal sovereignty enforcement, costing peanuts. Dreams of NATO membership and international interventions aren't something most Quebec need or in fact want. This new coastal defence force could be based in the Gaspé, with an important outpost in the Îles de la Madeleine , thus creating permanent employment for regions that will be highly impacted by the loss of federal unemployment insurance payments. As for defence of the realm, Quebec could enter into a defence pact with the United States whereby the United States Armed forces could be provided with a permanent base (like the Philippines) at the mouth of the northwest passage in exchange for providing air cover as a deterrence. The USA would jump at such a chance to extend their military reach.

4.Revamp the Educational system and get rid of CEGEPS 
Sovereignty should be an opportunity to revamp the educational system starting with the elimination of the CEGEP system which has proved to be an abject failure. High school would be extended by a year, thus returning Quebec to the tried and true North American model. It's been a policy of the Quebec government to try and improve graduation rates to mimic those in the rest of Canada, but lowering  standards to encourage enrolment hasn't worked, a costly disaster that has post high school non-achievers lounging in CEGEP for a couple of years before failing out. Universities could easily make up the extra year as enrolment in most French universities is way below capacity. By streamlining the system and raising standards, Quebec could graduate as many students as today with 20% less enrolment, a windfall that could actually pay for free post-secondary education. While tuition could be free for those who take school seriously, layabouts who flunk or drop classes would be required to pay a hefty price for failure, thus encouraging serious students only. One English university would have to close to reflect the outflow of Anglophones, but McGill should remain a pearl, even in an independent Quebec, providing higher education for both French and English students of exceptional ability.

5.Spread the wealth of government jobs
 While Quebec would save an enormous amount of cash after independence because it would no longer send Ottawa  taxes and remittances, the services provided by Ottawa like healthcare and defence would have to be provided by Quebec and those new services should be implemented so as to  better balance out government employment across the province, especially in depressed regions. I am reminded of a visit to Bathurst New Brunswick where I discovered a federal government office making social security cards for the entire country, providing employment in a depressed market.
Those new Quebec government agencies and offices created by Ottawa's withdrawal should be opened in areas that are depressed or otherwise losing federal agencies like Revenue Canada regional offices in Jonquiere and Shawinigan. It doesn't take a lot of government jobs to boost the Gaspé region and other depressed areas which already suffer from massive underemployment. Spreading out government jobs would provide meaningful non busy-work and eliminate stupid make-work programs like cement plants or wind technology manufacturing.

5. Eliminate wasteful busy-work projects
Quebec has mothballed several hydro-electric generating plants because of the lack of demand, while creating make-work jobs in wind generation and co-generation power that cost three to four times more than the closed plants. All wind farms and co-generation plants should be phased out and the technologies abandoned. The re-opening of mothballed hydro power plants would save Quebec over a billion dollars a year. The jobs lost would be compensated with good paying government jobs as described above.
Even with those measures, Quebec would remain with an over-abundance of electricity due to competition, conservation and cheap gas prices.  Measures should be made to increase electricity use in the public domain and perhaps all new residential homes constructed would be required to install electric heating only. While electric cars remain a pipe dream, other public uses of this Quebec resource could be raised as a priority. Even if electricity costs more to use than oil, it's use would be beneficial in the long run considering the spin-off effects.
Think of it like supporting your neighbourhood bakery which employs locals and purchases local raw materials. Even if the cost of the products is slightly more than buying from foreign sources the local economic benefits far exceeding the added price.

6. Temporarily suspend foreign aid
Canada is already a skinflint when it comes to foreign aid, but still spends about $5.7 billion dollars, of which Quebec taxpayers contribute over one billion dollars. A temporary moratorium would help Quebec achieve its goal of financial independence..

7. Review entitlements
Certainly nobody agrees that wealthy Quebecers should be entitled to government subsidized daycare and so an independent Quebec should take the opportunity to revamp all the entitlement programs that includes universality, the idea that subsidized programs are open to all Quebecers, even the rich.

8. Renounce pensions to those who abandon Quebec or Quebec citizenship.
Here's certainly a novel idea that would financially punish those who abandon the new state. Those who give up Quebec citizenship and move to Canada or parts unknown would no longer be entitled to a Quebec government old age pension. It's a bit harsh, but it will have many thinking twice about leaving and the savings on those who do would be considerable.

Now all the above measure would amount to more than the $10 billion required to balance the budget and so amazingly, you'll notice that I haven't even proposed any tax increases which could be left as an ace in the hole should circumstances deteriorate.

The biggest hindrance to sovereignty is not political, but rather economic. If sovereigntists can cobble together a reasonable plan of financial independence, the road towards independence finally becomes realizable.

16 comments:

  1. The PQ should hire you.

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  2. I would have prefaced that with "In a perfect world...." which, of course, we don't live in. (see'Brexit')
    Re: the elimination of CEGEPs. I can't speak for Quebec, but the educational establishment in Ontario is largely left-wing and they earn above average pay. I would think it will be pretty hard for a new government to axe them as they're likely to be hard-core supporters of independence.

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  3. I know it's not going to fly with the hardcore souvranistes but how about official bilingualism, at least within certain important economic zones (re: Montreal and Gatineau and maybe also the Englishy parts of the Eastern Townships)?

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  4. Well if and if and if..thats the problem with this piece..there is no chance in h@ll that Quebec as a country would even enact half let alone a quarter of the suggestions made. Number 7 would never happen..reduce entitlements in la la land. They probably would increase entitlemnents..free university and free this and free that.

    I think more than 15 billion in savings would be necessary..Canada likely loses 20 billion per year by having Quebec within it. Plus with the exodus of money and jobs the quebec economy would be a basket case for many years. Keep in mind that you are basing your numbers on the rosiest of predictions..a 5 billion dollar surplus right now which will likely turn into a 10, 15 or 20 billion dollar deficit as the money flees out of here.

    My guess is that the price of housing, land, labour all plummet within a few years. On top of it the new quebec currency will likely plummet hence at some point it will be worth it for investment to return but only if labour costs are lower and land is much cheaper and on and on. So in effect jobs will come back but at lower wages and the unions will be weakened as the government will have to layoff a bunch of governmnent workers to try and balance the budget.

    Its gonna be a mess..unions will become super militant..borderline civil war..what a mess..

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  5. Nothing. Zero. Ziltch. Nada. On the elimination of Bill 101 or whether an independent Quebec should become officially bilingual.

    If this is a column on success after independence and you haven't mentioned anything on the elimination of the language laws, am I to conclude that you, Philip don't think that will lend to Quebec's success as an independent nation? Or perhaps you believe that francophones are so prone to continuing to violate human rights and minority rights that it is a given that Bill 101 -- or worse -- will continue in an independent Quebec. Or some other reason you haven't included anything on language laws in your success formula for an independent Quebec?

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    1. Tony, I think Mr. Berlach has forgotten that the 20% that make up Quebec produce 40% of the tax base, at least in the world according to Beryl Wajsman of the Suburban. Quebec able to run on a 60% tax base with 80% of the population remaining? That doesn't add up; furthermore, what's to say the better Francophone minds would be foolhardy to contribute to a sinking ship?


      Mr. Sauga


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  6. He didnt mention language laws because there is ZERO chance of an independant Quebec weakening Bill 101..in fact the opposite will happen. English will be even further restricted..that is the whole point of seperation..to completely eliminate any english in this province..its the driving force of the seperatist movement..the hatred of english.
    The great irony is that by seperating the french language will be even more vulnerable as a much weaker Quebec will need to deal in english even more than evern to trade with other nations. Plus french will very likely be dropped as an official language in the rest of Canada hence making Canada even more unfriendly to french.

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    1. "English will be even further restricted..that is the whole point of seperation..to completely eliminate any english in this province..its the driving force of the seperatist movement..the hatred of english."

      no it's not. the "driving force" of the separatist movement is political freedom.

      "...hence making Canada even more unfriendly to french."

      right... so you think the french should not separate from a country that is unfriendly to them?!? that's odd.

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    2. no it's not. the "driving force" of the separatist movement is political freedom.

      That it a crock. The motivation and life blood of the seperatist movement is to get revenge on those evil english people (maudits anglais) who they believe are the source of all their current problems. Its as pure and simple as that. And believe me the first thing a seperate Quebec will do it to completely eliminate any services in english and create policies that make sure no anglophone will want to live in this country.

      "...hence making Canada even more unfriendly to french."

      Well if you think the rest of Canada is enamoured with Quebec now then you are quite delusional. Many Canadians and rightly so see Quebec as a spoiled ungrateful partner who have more benefits than any other province yet somehow always finds a way to complain. Quebec gets more money from t the rest of Canada than any other province..they have control over many programs..they have more federal government centres than any other province not counting the National Caital Region..Quebecois are over represented in the federal public service based on their numbers..and on and on. Yet it is never enough..so yes student a lot of Canadians are not particularily fond od Quebec and with good reason. On top of it many Canadians find it insulting that bilingualism is required across the country even in areas where less than 2 percent of the population is francophone yet here in Quebec its perfectly legal to require english to be smaller on all signs and to not offer bilingual services in areas where there are significant amount of anglophones.

      And yes if Quebec seperates then the anger and hostility towards Quebec will increase even more and there is no doubt in my mind that the rest of Canada will abolish french as an official language further isolating Quebec.

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    3. @complicated

      "The motivation and life blood of the seperatist movement is to get revenge on those evil english people (maudits anglais)..."

      no it's not. that is a myth angryphones keep repeating in order to convince themselves that quebec separatists are in it for the wrong reasons. in other words, you're participating in this huge strawman that's kept alive to undermine a separatist point of view. the truth is french canadians have always wanted political freedom. just as any nation in the world does. but not every nation should have their own country, as some lack the ressources, some lack institutions and others lack people. but quebec has it all.

      "And believe me the first thing a seperate Quebec will do it to completely eliminate any services in english..."

      yeah sure. you're trolling now right? or are you really that paranoid? you accuse separatists of wanting revenge over the "maudits anglais", which is false, and then one sentence further you are depicting the french as bad guys who'll close english everything, and on top of it you confirm that it's the english who will want a revenge after quebec separates by not cooperating and shutting french in the rest of canada. you do exactly what you wrongly accuse separatists of doing or even more far fetched what you think they long to do. how is that for a neat contradiction mate?

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    4. Hmmmmmm....nobody mentioned how Gorgeous Trudeau alienated an Anglophone woman who dared ask him a question in English only to be insulted and alienated with a French response. Nine people filed a complaint with the federal Commission of Official Languages, and rightfully so. In short, Gorgeous was bitten in the ass by his own father's creation. Stupidity will prevail. The first separatist cabinet in 1976 had a slew of well-accomplished academics from Harvard, Cambridge, London School of Economics, Columbia U., MIT and other world renowned educational institutions of higher learning and a lot of what they did made them a bunch of country bumpkins from the U de Québec à Chicoutimi. I don't think there is a full brain or half a dollar in THAT town!

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  7. but not every nation should have their own country, as some lack the ressources, some lack institutions and others lack people. but quebec has it all.

    Yeah Quebec has the highest debt in North America and the highest taxes..what a winning combination. We finally have some fiscal responsibility in the current Liberal government which gives me some slight hope but thats only because we have shut out the PQ from power for many years and also the generous equalization payments Quebec gets from the rest of Canada.

    yeah sure. you're trolling now right? or are you really that paranoid? you accuse separatists of wanting revenge over the "maudits anglais", which is false, and then one sentence further you are depicting the french as bad guys who'll close english everything, and on top of it you confirm that it's the english who will want a revenge after quebec separates by not cooperating and shutting french in the rest of canada. you do exactly what you wrongly accuse separatists of doing or even more far fetched what you think they long to do. how is that for a neat contradiction mate?

    You know when I first moved to Quebec I was a very naive english canadian who didnt think there was such dislike of the english. But after living 2 years here and constantly hearing francophones attack the english, english canada, it became pretty clear to me that there IS a great disdain towards anglophones particularily english canadians. It seems that les Quebecois like to blame all their problems on the rest of Canada..ie english canada..when in fact the problems in Quebec..chronic higher unemployment, high debt, high taxes, poor health care, horrible infrastructure is purely Quebec made despite all the money flowing into this province from the rest of Canada they still cant manage their affairs properly. It is not paranoia on my part.if anyone is trolling and obsessive it is you student. I have never spênt any time on a seperatist web site as I know anything I say will fall on deaf ears. Likewise you must know that little you say will register with any of us here as your whole point of being here is to anatagonize and provoke.

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    1. @complicated

      "Yeah Quebec has the highest debt in North America and the highest taxes..what a winning combination."

      for a few days now you have repeated quite a few times that i shouldn't use quebec's current state of affairs as an argument for quebec's separation as they are all facts pertaining to quebec as part of canada. remember? thing is you do exactly that here, yes quebec has high debt and taxes but this is quebec in canada. so if you think your argument is valid you'll have to apologize for dismissing mine. or you can stop parroting this thing and admit that quebec outside of canada will be something different, and the tax rate and budget line could be something else.

      "but thats only because we have shut out the PQ from power for many years"

      wrong. the last finance minister who balanced the budget before current guy was pq pauline marois in the late 90s. charest only piled up more debt and pauline marois in 2013 did not get enbough time to turn things around.

      "But after living 2 years here and constantly hearing francophones attack the english, english canada,..."

      are you sure it wasn't defense? if not you have bad neighbors that's all. i too here opinions against the rest of canada. it's always quite legetimate though.

      "chronic higher unemployment"

      false. quebec is currently under canadian average.

      "high debt"

      false. ontario and canada have deficits where quebec has a surplus.

      "I have never spênt any time on a seperatist web site as I know anything I say will fall on deaf ears. Likewise you must know that little you say will register with any of us here as your whole point of being here is to anatagonize and provoke."

      right. we have different objectives. you admit to be here for a nice circle jerk. on the other hand i'm here to study.

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  8. You are confusing deficit and debt. The debt of Quebec is the highest per capita in North America. Deficits are only for the year. Debt is the accumulation of all those years of deficits.

    Unemployment is finally lower..but only very recently like the past 2 years. You can thank very low oil prices for raising the rates in many western provinces and allowing the dollar to drop. You can also thank the stabilitty of a non-seperatist agenda over the past many years helping increase investment in Quebec. Under Marois conditions deteriorated but I will give the Liberals and Couillard credit for handling the economy well and the deficit. However there are other areas where they have not done a great job.

    Marois was too obsessed about introducing new laws to hurt immigrants and anglophones that she of course forgot about the economy which typically is what happens with most PQ governments..but Marois was IMO the worst PQ premier ever..very despicable woman.

    What is shocking is that Quebec has the highest debt in North America depite Canada funnelling billions and billions of dollars into it and depsite being part of one of the richest countriesi in the world. Quebecs problems as I have noted many times are made in Quebec..so imagine a seperate Quebec that had total control of finances..it would be a disaster especially under a seperatist government.




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  9. @complicated

    "You are confusing deficit and debt. The debt of Quebec is the highest per capita in North America. Deficits are only for the year. Debt is the accumulation of all those years of deficits."

    of course i know this. but if you are to tackle your debt problem you have to address the yearly deficit. i thought you'd follow me in that shortcut but you didn't. my bad i should not have overestimated you.

    "Under Marois conditions deteriorated..."

    oh really? please substantiate this.

    "However there are other areas where they have not done a great job."

    i totally agree. they are shit in many areas.

    "Marois was too obsessed about introducing new laws to hurt immigrants and anglophones..."

    really? what laws?

    "Marois was IMO the worst PQ premier ever..very despicable woman."

    ah so you fell for the national post propaganda then. what a shame.

    "What is shocking is that Quebec has the highest debt in North America depite Canada funnelling billions and billions of dollars into it and depsite being part of one of the richest countriesi in the world."

    hum, right. let's try something else then. quebec as a province soesn't seem to work very well if we are to believe what you're saying.

    "so imagine a seperate Quebec that had total control of finances.."

    it's odd you say this when canada has a sky high deficit and quebec has none.

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  10. Well you are a true master of manipulating my words..not sure there is much point responding to you.

    Marois..remember the famous charter of values which was simply a guise to make life more difficult for immigrants and divide people in this province..pitting the pur laine against those evil immigrants. If you think otherwise which you probably do then you have drunk the PQ koolaid.

    I am not sure you quite understand what I am saying about the debt. Debt is the most important number...deficits are short term..its the debt that matters..we do have the highest debt per capita on this continent even though we have had a few surpluses..we need many more years of surpluses to get the debt down to the levels elsewhere. And even within a strong canada that feeds billions and billions into Quebec..somehow Quebec still ended up with the highest debt..this shows the level of incompetence at the provincial and municipal level..but its a reflection of the entitlement mentality of most Quebecers.

    Happy Canada Day student!

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